A roundup of Thursday’s stock market results from across the Americas
👑 Colombia leads in Latin America:
The Colombian stock market rose 2.30%, driven by the performance of the energy, communication services and materials sectors. Shares of Cementos Argos (PFCEMARG), Ecopetrol SA (ECOPETL) and Grupo Aval (PFAVAL) led the hikes.
Argos met third quarter earnings estimates, while Ecopetrol announced that it is exploring business in Venezuela following the reopening of bilateral relations. In addition, Finance Minister Jose Antonio Ocampo said at a stock exchange event in Bogotá that the possibility of awarding more exploration contracts is not closed if studies show that they are necessary.
YPF, the oil company that has the Argentine state as its main shareholder, presented on Wednesday the results corresponding to the third quarter of 2022, which reflect the growing relevance of Vaca Muerta and non-conventional production in its business. Taking the official wholesale exchange rate at the end of September, the energy company reported more than $627 million in net profits for the period.
📉 A bad day for the Ibovespa:
Brazil’s Ibovespa (IBOV) was the Latin American index to post the sharpest falls, falling 3.35%, dragged down by the performance of the non-core consumer products, real estate and information technology sectors. Shares of Azul SA (AZUL4), YDUQS Participacoes (YDUQ3) and Hapvida Participacoes (HAPV3) fell the most.
The Brazilian market fell as fears grow among investors over the possibility that President-elect Luiz Inácio Lula da Silva’s spending plans will increase budget deficits and undermine fiscal accounts.
“The honeymoon with Lula is over,” said Thierry Wizman, a currency and interest rate strategist at Macquarie Capital in New York. “A few weeks of excitement and then real life begins.”
Investors are worried that the president will increase spending more than expected. Lula, who was elected for a third term, is looking for room in the budget to fulfill his campaign promises, which have an approximate spending of $37 billion.
In addition, Brazil’s inflation was higher than expected in October, breaking a three-month streak of deflation. Specifically, consumer prices rose by 0.59% month-on-month, when the median estimate from a Bloomberg survey was 0.49%. The annual figure fell to 6.47%.
🗽 On Wall Street:
Stocks surged in a buy-everything relief rally after slower-than-projected price growth spurred bets the Federal Reserve can downshift its aggressive rate-hike path.
The S&P 500 climbed 5.5% for the best first-day reaction to a CPI report since at least 2003 when records began. About 96% of stocks in the benchmark were in the green, the broadest advance since Oct. 4, according to Bloomberg data. The rally caught short-sellers wrong-footed, helping spur the outsized gains. Crypto markets stabilized despite the turmoil surrounding crypto exchange FTX.
The Nasdaq Composite (CCMPDL) climbed 7.35% and the Dow Jones Industrial Average 3.70%.
Headline inflation came in at 7.7%, the lowest since January, before Russia’s war in Ukraine pushed up commodity prices. More important for the Fed, the core measure that excludes food and energy slowed more than anticipated.
Thursday’s intense rally only partially clawed back steep losses this year for risk assets hammered by Fed’s tightening. The S&P 500 is still down 17% in 2022 and the Nasdaq 100 is off nearly 30%, with both headed for their worst years since 2008.
Treasuries soared, sending the rate on two-year notes, more sensitive to monetary policy, down 25 basis points. Rates traders downgraded the odds of another three-quarter-point rate increase in December almost to nil, while continuing to price in a half-point hike. The Bloomberg dollar index sank 2%.
“The first downside surprise in inflation in several months will inevitably be received by an equity market ovation,” Seema Shah, chief global strategist at Principal Asset Management, wrote. “A 0.5% hike, rather than 0.75%, in December is clearly on the cards but, until we have had a run of these types of CPI reports, a pause is still some way out.”
Fed officials appeared to back a downshift in rate hikes after a stretch of four jumbo-sized increases. They also stressed the need for policy to remain tight.
Dallas Fed President Lorie Logan said it may soon be appropriate to slow the pace to better assess economic conditions. San Francisco’s Mary Daly said the moderation was “good news,” but noted “pausing is not the discussion, the discussion is stepping down.”
Swaps markets pulled back bets on a peak rate to slightly less than 4.9% in the first half of next year, from more than 5% before the CPI data.
“Today’s CPI report showed some moderate improvement as some of the previously elevated excessively high inflation-drivers, such as used cars, started to decline at a faster pace,” Rick Rieder, chief investment officer of global fixed income at BlackRock Financial Management Inc., said.
On the currency markets, the Bloomberg Dollar Spot Index fell 2%, the euro rose 1.8% to $1.0196, the British pound rose 3.1% to $1.1713 and the Japanese yen rose 3.6% to 141.26 per dollar.
🔑 The day’s key events:
Oil prices rose on Thursday amid a volatile session. Wall Street’s rally caused investors to shrug off concerns over China’s Covid Zero policy weighing on the demand outlook and they were unable to resist risk appetite.
West Texas Intermediate (WTI) closed above $86 a barrel after a choppy session in which futures traded in a $3 range, while Brent futures settled around $93 a barrel.
Despite earlier weakness in the session, optimism of slower-than-expected U.S. inflation and the possibility that the Federal Reserve will moderate aggressive interest rate hikes supported crude oil prices higher.
“Oil was starting to look too heavy as China continues to struggle with Covid, but that is being offset by optimism that the US economy could avoid a recession,” said Edward Moya, analyst at Oanda Corp.
🍝 For the dinner table debate:
Elon Musk sent his first email to Twitter (TWTR) staff as owner of the company Wednesday night and told them to prepare for “tough times.” He also banned remote work unless he personally approved it.
Musk said there was “no way to sugarcoat the message” about the economic outlook and its effects on an advertising-dependent company like Twitter, according to the post, seen by Bloomberg News.
The rules on remote work went into effect immediately and Musk expects employees to work at least 40 hours a week in offices.
Musk has been at the helm of Twitter for nearly two weeks. During that time he has fired around half the workforce and most of its top executives. He has raised the price of the Twitter Blue subscription to $8 per month and added the user verification badge. Musk told workers in the email that he wants subscriptions to account for half of Twitter’s revenue.
Leidys Becerra, a content producer at Bloomberg Línea, and Stephen Kirkland of Bloomberg News, contributed to this report.